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Date Created:June 29, 2018

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Tags:USPScopyright, McCaffrey, Gaylord, Timmins, Isaacson, Image, stamps, Postal, Statue, Stamp, Davidson, liberty, vegas, service, defendant, plaintiff, Supreme Court, states, united


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the United States Court Federal Claims
No. 13-942C
(Filed: June 29, 2018)
**********************
ROBERT DAVIDSON
Copyright infringement;
U.S.C. 1498(b); Originality;
Fair use; U.S.C. 107; Flat
fee license; Running royalty;
Mixed license.
Plaintiff,
THE UNITED STATES,
Defendant,
**********************
James Pisanelli and Todd Bice, Las Vegas, Nevada, with whom were
Debra Spinelli and Dustun Holmes, for plaintiff.
Scott Bolden, Deputy Director, United States Department Justice, Civil
Division, Commercial Litigation Branch, with whom were Chad Readler,
Acting Assistant Attorney General, and Gary Hausken, Director, for defendant.
Lee Perla and Alexa Hanna, Department Justice, and Redding Cates,
United States Postal Service, counsel.
OPINION
BRUGGINK, Judge.
This action for copyright infringement brought Robert
Davidson, the sculptor the Lady Liberty replica statue front the New
York-New York Hotel Casino Las Vegas, Nevada, against the United
States, acting through the United States Postal Service Postal Service,
USPS two week trial was held September 2017. Post-trial briefing now complete, and post-trial argument was held May 2018. Because find that Mr. Davidson work was original and because the Postal
Service use was not permitted statute, entitled compensation the amount $3,554,946.95, plus interest.
BACKGROUND
Plaintiff fabricated replica the Statue Liberty the grounds
the New York-New York Hotel Casino Las Vegas 1996. applied
for and obtained copyright for the replica 2013, too late for the statutory
presumption validity. also undisputed that the Postal Service used
photograph that work stamp released December 2010 without
permission attribution Lady Liberty stamp Plaintiff now seeks
compensation for that use under U.S.C. 1498(b) (2012).
Defendant answers that plaintiff work too similar the original
New York Harbor and that the government use copied nothing original
plaintiff. Defendant also presents the defense fair use under U.S.C.
107 (2012). rejected summary judgment defense under section
120(a), which exempts pictorial representations architectural works.
Davidson United States, No. 13-942C, 2017 3033774 (Fed. Cl. July 18,
2017). The questions for trial were thus whether the Las Vegas Lady Liberty sufficiently original afforded copyright protection, whether the
government use was infringing, and, so, whether was otherwise excused fair use under U.S.C. 107. The final question, there was originality,
infringement, and fair use, the measure compensation owed plaintiff.
Trial told the story how Mr. Davidson was contracted create the
replica and then his actual process creating the statue that sits the corner Las Vegas and Tropicana Boulevards Las Vegas, Nevada. The narrative
then shifted the Postal Service selection and use that image for its new
2011 workhorse Forever Stamp, followed the events that happened after
the use Davidson statue was discovered 2011. The third act consisted the presentations experts who offered opinions the merits the stamp
among collectors and, most centrally, what the government would have paid
for such use plaintiff work had the parties negotiated beforehand
arm length under normal market conditions. received testimony from the
following witnesses: Plaintiff Robert Davidson primarily testified about his background working with large-scale plaster work and sculpting, including his actual
means and method when sculpting the Las Vegas Lady Liberty issue. Roy Betts USPS senior public relations representative.
testified regarding his public statements after the identity the Lady Liberty
image was publically discovered, and other internal communications regarding
that issue. Shawn Quinn the USPS program manager for technology
acquisition. testified regarding his experience the Postal Service, the
process manufacturing the stamps issue, USPS decision continue
using the Lady Liberty stamp after the identity the sculpture was discovered,
and other background information. Joe Stratton the Postal Service manager technical analysis,
accounting, and finance. testified regarding his postal experience
relates the sale stamps, USPS accounting procedures they relate the
sale stamps, and any profits derived therefrom. also testified more
specifically about the sale the stamps issue this case and how they were
accounted for. Terry McCaffrey was the former manager stamp development
USPS. His testimony was heard via taped video deposition. testified
about the Postal Service process selecting the image Mr. Davidson
work well the approval and finalization that image. was also asked
why flag-bearing stamp was married the Lady Liberty stamp, about stamp
classifications, and provide other background information about relevant
Postal Service processes and contractors. William Gicker the Postal Service current manager stamp
development and was, the time the events discussed during trial, the
creative director for stamps. Tr. 812. testified regarding the selection
the image Mr. Davidson statue, the process finalizing that selection and
placing the stamp, and the expected sales such stamp. was also
asked about USPS policies and procedures regarding the intellectual property the images that the Postal Service uses its stamps and any resulting
licenses. Amity Kirby the USPS senior licensing specialist. She testified
regarding her experience licensing out stamp images for third party use. Jim Timmins business valuation expert with particular expertise the valuation intellectual property. testified plaintiff expert
the proper measure damages, offering his prior experience valuing the
licensing intellectual property and his valuation hypothetical license
between plaintiff and USPS. Bruce Isaacson expert market research and public surveys. informed the court the results 2016 survey that conducted related public customer behavior retaining, not, the Lady Liberty stamp.
10. David Keller the supervisory park ranger for the National Park
Service the National Mall Washington, DC, and was park ranger the
Statue Liberty from 2004 2011. was offered records custodian
for photographs the New York statue. Those photographs ultimately were
not admitted into evidence.
11. Daniel Piazza assistant curator philately the Smithsonian
National Postal Museum. expert stamp collecting and the use and
history stamps. testified about stamp collecting generally and his
opinion regarding the popularity the Lady Liberty stamp among collectors.
12. Christopher Bokhart independent financial expert
accounting and damages relating intellectual property. shared his
opinions regarding the value hypothetical license between plaintiff and
USPS, had one been agreed before the events question.
13. Sarah Handwerger general counsel RightsAssist, LLC,
contractor for the Postal Service. Her testimony was accepted into evidence way agreed-upon designations and counter-designations deposition
excerpts. She testified regarding the selection the image the Lady
Liberty stamp and her and RightsAssist role that process. That testimony evidence Joint Exhibit 12.
14. Sidney Brown the Executive Director PhotoAssist, Postal
Service contractor. She testified regarding her efforts for USPS obtaining
rights images that uses stamps. Her testimony was presented the
form designated deposition transcript excerpts, which are evidence
Joint Exhibit 13. Mr. Davidson And The Las Vegas Lady Liberty
Mr. Davidson began working with plaster the early 1970s, initially building construction, primarily the outside buildings being built the
Las Vegas area, where has lived his entire life. started company
called Valley Plastering water boy hosing down stucco exteriors
plastered the previous day. worked his way the ranks over year
period, reaching the rank executive vice president before left the
company 1987. then started his own plastering business 1988, called
PlasterTech.
PlasterTech was first primarily subcontracted custom residential
jobs. gained skill and reputation, plaintiff was tasked with interior
plaster work well. recalled one home which finished fireplaces,
including one that had lion head design. See (picture lion
fireplace).1 Thus began his experience sculptor and designer plaster
work.
Plaintiff sold his business and equipment Ford Contracting 1993
and began working directly for that company. Ford was much bigger
contractor, working large-scale commercial projects such hotels. his
career progressed, Mr. Davidson shifted focus the custom design and
sculpting plaster pieces. explained that used foam create the
general contours the finished pieces, which was easier shape and refine
with high degree precision. Additional materials were placed top the
foam, including the plaster equivalent material for the top finished layer.
One large project which plaintiff worked Ford Contracting was
the Luxor Hotel Las Vegas. Mr. Davidson described his role using
plaster and stucco, both the interior and exterior, theming work. that
case, involved finishing the plaster and stucco surfaces match the
Egyptian theme the hotel. Tr. 67. and his crew finished many these
walls mimic giant precut limestone blocks. doing so, built wire
templates and cutters make the lines uniform appearance. Also part the
theme the Luxor was 110-foot-tall replica the Sphinx Egypt.
Mr. Davidson testified that Ford Contracting original Sphinx
sculpting subcontractor was unable complete the face the statue, and
plaintiff volunteered finish it. finishing had been done the face when
plaintiff took over that project; only the frame stood where the face would be. described his finishing process. began with another firm making
maquette2 based the face the architect, Veldon Simpson, who designed
the Luxor Hotel. After establishing some reference points the frame, Mr. stands for plaintiff exhibit; stands for defendant
exhibit; and stands for joint exhibit. maquette much reduced scale model the eventual statue.
Davidson and his crew began adhering blocks foam, precut roughly
match the dimensions that were needed form the face. From there, the foam
blocks were filed, rasped, shaped, and sculpted best Mr. Davidson could
match the face the Simpson maquette. When was satisfied with one side the face, would take measurements try match the opposite side
the face closely possible. changed the face somewhat, however,
avoid unnatural symmetry the face. After the form was correct, the
plaster and other finish materials were layered on, and the statue was painted. took three months finish the face the Sphinx with the majority the work being done night. During the project Davidson became
acquainted with the Western Architecture firm and individual named Tracy
Jones. Plaintiff testified that was this relationship that led him selected the sculptor the Lady Liberty statue outside the New York-New York
Hotel Las Vegas. Mr. Jones connected plaintiff with company known
Recreation Development Company RDC which had need sculptor subcontractor create the statue front the hotel and casino. After his
success with the Sphinx, Mr. Davidson was eager take the even larger
task the Lady Liberty.
Plaintiff bid $385,000 the finish work the Statue Liberty
replica. His was the winning bid. RDC was responsible for building the
structure until the point which the foam would applied Mr.
Davidson. Plaintiff testified that, per the contract, RDC was supposed have
supplied scale model for plaintiff follow. such model was provided
plaintiff, however. Instead was provided only some photographs the
original, 12-inch curio, and the architect outline the general shape and
form the statue, which plaintiff used for rough dimensioning. The Las
Vegas statue was intended approximately two-thirds the size the
original Statue Liberty.
Davidson took many trips his local library view pictures the
New York statue, but picture found provided the three-dimensional feel the statue. Tr. 130. The differences shadow and vantage point meant
that one photograph was sufficient working guide. Plaintiff was thus
left construct his own maquette guide for the larger statue, which
did. See 234 83-86, 7-50, 56-57 (pictures the plaintiff sculpting the
maquette). did making cross-sectional slices, stacking them and
gluing them together. The maquette was finished with the same cementitious
acrylic-based coating the final large statue. The maquette was built inside jig, which allowed plaintiff transfer the dimensions, scaled up, the
larger statue. Mr. Davidson also created dimensioning graph further aid getting the dimensions right.
Plaintiff began the construction the outside the large statue before
the maquette was finished. Although the maquette was his guide, could not perfectly replicated, nor did try copy precisely. The process
forming the Lady Liberty was similar that used building the face the
Sphinx. Large blocks foam were cut rough dimension. Plaintiff then
used finer tools sculpt the form and image desired. The finish
materials plaster mud and the acrylic-based coating were also used
give shape the statue. These could layered supply extra depth used fill unwanted negative space. The very finest details were added using
hand rasps.
Plaintiff described the process finishing the 12-foot-high face this
manner:
Then comes the point where with those fine hand
rasps and start rasp down. That when the face starts
get some life and really starts speak you and kind
tells you which way got go. And tells you you
wrong. really does. You just start getting that point
where you are satisfied with the results and you just stop.
Tr. 160. went describe how the statue began take life for him and evoke emotional response:
But then you get this point, this where you start giving the
eyes little life, little subtle touches the lips and every part it. Like said, this the part the sculpture, really the
only part the sculpture, that starts speak you.
Tr. 162. was asked what had mind when creating the face:
Well, felt since this was going for new hotel Las
Vegas, felt just needed little more appropriate for the
hotel. knew that the facade the hotel would look similar
the skyline New York, but wouldn duplicate it.
Everything out proportion. was just feel. And
just thought that this needed little more modern, little more
contemporary face, definitely more feminine, just something
that thought was more appropriate for Las Vegas.
Tr. 162-63. further testified that looked for guidance picture his
mother-in-law every day and that her face was large influence the final
form his Lady Liberty visage. direction was given him nor did
anyone sign off his design decisions. was given free rein sculpt the
statue long the theme the New York City skyline was maintained. His
final product was, his own words, little more modern, little more
feminine. Tr. 169. thought that the original statue face was little
harsher. wasn welcoming. was little more masculine. Tr. 175.
wanted end result that was softer and more contemporary. Id.
hard for use adjectives. one those things, you sculpt and you until you think you got right. Id. was asked whether made these changes differentiate his work
from the original whether they were just byproduct your design. Tr.
174. replied that was byproduct his design and that the specific
features more defined eyes and eyelids pronounced cupid bow shape upper lip were not specifically intended.3 Tr. 173. October 1996, Mr. Davidson completed his work. dedicated
his achievement placing small plaque memory his mother-in-law
the crown the statue. Tr. 179; 233 296 (photograph plaque). The
parties stipulated that Mr. Davidson material and labor costs build the
statue totaled about $152,000, leaving him approximate profit $233,000
($385,000 bid minus the $152,000 costs). The $385,000 that plaintiff
Those adjectival descriptions the face his statue were quoted
from plaintiff copyright application file (JX and were not endorsed him the stand. Defendant argues that these descriptions are not evidence
because they constitute attorney advocacy. any event, not rely
those statements because plaintiff did not endorse them the stand. reads: loving memory Lucille Schwartz This one for
you, mom. Sculpting completed October 1996, Robert Spencer Davidson.
Tr. 180.
received for the project comparable other large projects that Mr. Davidson
completed subsequent the Lady Liberty.5
II. The Postal Service Use
The Postal Service introduced the first Forever Stamp 2007, bearing
the image the Liberty Bell Philadelphia. Forever Stamp purchased the price first-class postage the time purchase, but its value use always equal the current price one-ounce first-class postage. Upon
introduction, quickly became the main workhorse stamp for USPS.
workhorse stamp one printed USPS and used the public primarily
send first class mail. high volume stamp with high percentage being
redeemed for postage. 2008, the Postal Service began work updating the image its
Forever Stamp. Terry McCaffrey, the manager stamp development the
time, was charge selecting the new image. Both and William Gicker,
McCaffrey eventual replacement, testified that the public was tiring the
Liberty Bell image. Tr. 735. McCaffrey was looking for something different
and unique. Tr. 764. Because the new Forever Stamp was workhorse
stamp, the Postal Service and the Citizens Stamp Advisory Committee
intended another patriotic icon.6 Mr. McCaffrey testified that the
committee liked the idea U.S. flag stamp but that such image had been
used many times for workhorse stamps that the Postal Service and
committee did not want issue the flag stamp itself. Ultimately flag
stamp was issued contemporaneously with the Lady Liberty stamp, and they
were sold together.
Mr. Davidson testified that also built the Joan Arc the Paris
Hotel Las Vegas and Mount Rushmore-styled sculpture featuring Dudley
Do-Right characters Universal Studios Orlando, Florida. stated that received about $350,000 gross for these works.
The Citizens Stamp Advisory Committee made maximum non-USPS employed individuals who serve the Postmaster General
pleasure assist selecting images and artwork for stamps. See Tr. 679.
Hundreds ideas for stamp subjects are also submitted the Postal Service the general public. Mr. McCaffrey also testified that unwritten rule
that there must patriotic icon circulation all times. Tr. 676.
Mr. McCaffrey began the search for new image asking
contractor, PhotoAssist, give him access several photo repositories
look for images the flag and the Statue Liberty. testified that, the
time, the Postal Service had already used least different images the
Statue Liberty different stamps one form another. thus searched
the sites himself because was looking for something different and unique.
Tr. 764. all those images, only two three were isolated the face,
which what was drawn for the focus the stamp. Id. 765.
McCaffrey initially narrowed his selection images the statue
and the flag. These were then narrowed three images each, one which
was plaintiff statue, photograph the face taken Raimund Linke.
Mr. McCaffrey made these selections and did the subsequent culling
himself over the course single afternoon. then contacted Mike Owens PhotoAssist and asked him obtain digital image files that could work
with make his final selection. The photograph plaintiff sculpture came
from Getty Images Getty Mr. McCaffrey did not realize that was not
the New York statue. The other two pictures, from other vendors, were the
original statue.
Mr. McCaffrey selected the photograph plaintiff creation for use the new stamp. June 2010, purchased from Getty behalf the
Postal Service nonexclusive three-year license for Mr. Linke photograph,
which authorized USPS print over one million copies the image.
(Getty license agreement). USPS paid Getty $1,500 for the license.7 Mr.
McCaffrey stated that would not have selected the image had known
was not the real Statue Liberty. Tr. 805. That testimony was echoed
Sidney Brown, whose deposition testimony was admitted written form. See 317-18.
Mr. Gicker, the current head stamp design testified that the stamp
development group has annual budget approximately $3.3 million,
$400,000 which designated for the purchase art and images used stamps. This budget has remained largely static for the past years. Mr.
Stratton testified regarding the overall financial picture the Postal Service,
stating that costs have exceeded revenue each year since 2006, meaning that
USPS operates loss. See Tr. 647-48. Nevertheless, annual revenues have
exceeded $60 billion since 2008. Pretrial Stips. Fact USPS were
private firm, would Fortune 500 company. Tr. 1003 (Gicker)
After receiving the rights and the image, Mr. McCaffrey sized and
cropped the picture make appropriate for first-class stamp. Other than
the addition the typical Forever Stamp text superimposed the face the
stamp, further alteration was made the photograph. The design had been
generally approved for use workhorse stamp the advisory committee
and the Postmaster General 2008. The committee also approved the pairing the Lady Liberty stamp with the newly designed flag stamp which Mr.
McCaffrey had been working.
With the rights the image secured and finalized stamp designs
approved, the Postal Service made the decision issue the two new workhorse
stamps December 2010. According Mr. Gicker that schedule was
accelerated from the normal practice. Tr. 828-29. USPS was anxious move from the Liberty Bell stamp because the several-year run that stamp
created accounting difficulties for the Postal Service. the price firstclass postage rose over time, became more difficult for the Postal Service
account for the value stamps that were sold but unredeemed. new issue
allows the Postal Service mark all outstanding new stamps minimum
value the new stamp issue date.8 This internal pressure, conjunction with
the external demand for new stamp design, drove the Postal Service move
quickly from the Liberty Bell stamp. addition, the Postal Service hoped
put the new stamps circulation time for the holiday mailing season. The
two new stamps, Lady Liberty and the flag stamp, were released for public sale about December 2010, and went into full production workhorse
stamps. press release was issued that same day that attributed the
photograph the statue Mr. Linke. 76. Plaintiff was given
attribution. March 18, 2011, USPS was made aware that the image the
stamp was that plaintiff work when individual from stock
photography company, Sunipix, emailed the Postmaster General inbox with
that information. The Postal Service and PhotoAssist quickly Mr. Stratton explained, postage stamp evidence payment for
future services rendered USPS. Therefore USPS cannot simply book
unredeemed stamps as, essence, profit, without accounting for the likelihood
that some those stamps will called and the Postal Service required
provide service exchange. See Tr. 634. will further explained, some
amount stamps sold USPS will never redeemed. These then can
accounted for pure profit.
confirmed the facts and USPS began working internally what its response
would be. Layne Owens, the manager stamp development, noted
email Stephen Kearney USPS that, although PhotoAssist had failed
properly identify the subject the photograph, after looking it, quite
apparent that had the Las Vegas replica. 85. response
inquiry from Mr. Kearney, Mr. Owens represented March 21, 2011, that,
had stamp development known the origin the photograph, would have
attributed the photograph having been taken the statue Las Vegas;
however, would still have used this photo. went
explain that the Statue Liberty had appeared stamps prior this one
and that Mr. McCaffrey selected the image did because was very
different from anything done before. That was its appeal. There are
only many ways continue reinterpret iconic image. Id. Mr.
Kearney then promised pass along this information Roy Betts, USPS
spokesperson, who had also received notice the error from Sunipix. Id.
Mr. Owens confirmed that information Roy Betts later that same day separate email: USPS still love[s] the stamp design and would have
selected this photograph anyway. were looking for different treatment this icon that has been different stamps. 244 Mr. Owens
further represented that corrections future materials regarding the stamp
would made but that did not think the Postal Service needed issue
stand-alone correction. That was the public position Mr. Betts disseminated
when asked media and stamp collecting groups. repeated the
representation Mr. Owens that the Postal Service loved the image, that
was looking for something different, and that would have selected the image
even the facts had been known 2010. See Tr. 420-21 (Betts); see also
109; 110. made the same statements other USPS personnel.
108; 121 internal memo dated March 23, 2011, Mr. Kearney detailed the
error, stating that three billion the paired stamps had been printed date
and that the legal department had been tasked with determining what licenses
must executed. 95. The memo also reflected that USPS was
examining what the contractual relationship between the sculptor the Las
Vegas statue and the New York-New York Hotel was, concluding that
[was] too early determine whether any liability exists how much
compensation may required. Id. Mr. Owens informed the Citizens Stamp
Advisory Committee April 14, 2011, that the stamp would continue
used until supplies were exhausted and that the image bold graphic that
works well stamp size and immediately recognizable Lady Liberty. 104. reported that the stamp was very popular. Id.
Several months later, response inquiry member
Congress, the Postal Service stated that should have correctly attributed the
image Mr. Davidson and that new procedures had been put place avoid
such errors the future. 151 (June 2011 letter from the Deputy
Postmast General Congressman Elliot Engel). The Postal Service letter
also indicates that million had been invested printing these stamps and
that withdrawing and reissuing new one would have been cost prohibitive.
Id.
USPS continued ship and sell the Lady Liberty stamp. June
2011, USPS had printed 10.5 billion the stamps, 4.4 billion which were
already the field for sale had been sold. was anticipated that the
remaining stamps would ship later that year. See 148 (email from Charles
Delaney Roy Betts). Mr. Quinn testified that, September 2011,
additional 1.125 billion stamps were issued. Tr. 539-40. Mr. Quinn
explained, given the production already completed, would have been
impossible for USPS have produced another one billion stamps replace
those already printed and ready for distribution. Tr. 529-32. January 2014, the Lady Liberty stamp was retired along with the
paired flag stamp. Ultimately, 4.9 billion the Lady Liberty stamps were
sold, amounting just over $2.1 billion sales for that stamp alone. Equal
figures were sold and collected for the paired convoyed flag stamp.9
USPS employs firm called Synovate track and calculate how many
stamps will not used send mail. This percentage known retention breakage. Tr. 546-51 (Quinn). The Postal Service tracks these numbers
because accounts for stamps that will never redeemed differently from
those likely used postage. Stamps retained collectors otherwise
never redeemed represent virtually pure profit for USPS. Tr. 551. The higher
the retention rate, the better for USPS, and Mr. Quinn stated that exploiting
breakage and retention was always interest USPS management. Tr. 551,
611. not clear what happened the remaining 4.5 billion stamps that
were printed but not sold distributed for retail sale. that end, Synovate provided quarterly surveys retention stamps the Stamp Services Department USPS, which tracks such information
glean which stamps consumers were attracted to. Tr. 610-11. Mr. Quinn
created spreadsheet 2011 that reflected retention rate for the Lady
Liberty and flag stamps nearly 4.69% for that year, which amounted
nearly $75 million value USPS.10 Tr. 577-78, 582; 154; 154A.
Mr. Quinn further explained, that although that retention rate not high, those
figures represented high degree profitability since the volume
workhorse stamps very high.11 The final official USPS estimate for
retention the two stamps was 3.24%. Tr. 632-33 (Stratton). That figure was
adopted the Postal Service financial statements. Tr. 633. The Postal
Service final estimate for profitability from the Lady Liberty stamp
$70,969,419 with equal number for the flag stamp. See 212
(interrogatory answers).
III. Legal History
After the successful and profitable completion the Las Vegas Lady
Liberty statue, Mr. Davidson took photograph the face the statue and
used logo for his PlasterTech business and for new concrete cutting
business that started. Tr. 189-90; 233 313 (photograph). testified
that beginning around 1997 1998 used the image letterhead, business
cards, equipment, and the side trucks. Tr. 189-90.
Plaintiff reports discovering the use his statue the Postal Service
one day after his wife returned from trip local post office. She had
purchased book Forever Stamps and excitedly notified her husband that
our statue the stamp. Tr. 192. Some time thereafter, plaintiff
Other lower rates were also offered trial defendant expert
Bruce Isaacson based his own survey work conducted for trial. will
discuss those numbers greater detail below. also stated that, contrast, commemorative stamp, which
usually greater interest collectors, might have retention rate high percent. The gross numbers total sales commemorative stamps would much lower, however. not clear from his testimony when precisely this occurred, but
must have been sometime prior January 2012 given that attorney filed
(continued...)
contacted attorney regarding copyrighting his work. She agreed file
copyright application his behalf and did January 2012. See
(copyright application). Mr. Davidson also contacted litigation firm based Minneapolis, Minnesota, concerning his rights his work. According
plaintiff, after several years working with Mr. Davidson, that firm withdrew
from representation based asserted conflict interest. See Tr. 194.
Plaintiff then found local counsel who performed some additional work
regarding the copyright registration. Mr. Davidson copyright eventually was
issued with effective date November 15, 2013. See (Copyright
Registration No. 1-882-070).
Mr. Davidson has never sought license otherwise monetize his
copyright the Las Vegas statue nor has attempted enforce his copyright
against any party other than the United States. was asked why sought
compensation from the government this lawsuit: don know how they would acknowledge me. don believe
after the fact that they would put name the stamp.
name was the stamp, then everybody would immediately
recognize that was me. And was just very tough, very
demanding project. And very proud her, and just
something didn think lightly of.
Tr. 200. was also asked what would have done had the Postal Service
approached him prior producing the stamp and asked permission use
image. responded that would have sought advice what the value image his statue would have been. Tr. 200.
Plaintiff filed suit here November 2013. After three years
discovery, the parties filed cross-motions for summary judgment March and
April 2017. Plaintiff sought ruling that his work was original and protected
and that the government was liable for infringing his copyright; defendant
asserted the defenses non-originality, fair use, and that plaintiff statue was
not eligible for copyright protection because was architectural work for
which pictorial representations are exempted from copyright protection.
denied both parties motions order dated July 17, 2018, which
rejected defendant argument regarding the pictorial representation
(...continued)
copyright application his behalf that time.
architectural works exception. set the matter for trial all unresolved
issues.
DISCUSSION
There dispute that defendant used image plaintiff statue
without permission. Although the Postal Service paid for license from Getty
Images for the photograph, Getty had rights the underlying subject the
photograph. U.S.C. 1498(b) waives sovereign immunity for claims
copyright infringement against the federal government for the recovery his
reasonable and entire compensation damages for such infringement. Id.
The Copyright Act specifically protects pictorial, graphic, and
sculptural works. U.S.C. 102(a)(5) (2012). These works must
original. Id. 102(b). previously held that Mr. Davidson statue was
sculpture rather than building but did not reach the question originality.
Davidson United States, No. 13-942C, 2017 3033774, (Fed. Cl. July
18, 2017). The Copyright Act protects the the form but not [the] mechanical utilitarian aspects artistic craftsmanship. Id. 101. Plaintiff must
prove valid copyright, that was infringed, and his damages.
Defendant has asserted that the statue replica and contains truly
original work, meaning that plaintiff copyright invalid and the government
owes nothing for its use image plaintiff statue. related
argument, defendant contends that copied original elements. Defendant
also pleads the statutory defense fair use under U.S.C. 107, which
excuses certain uses copyrighted work. Defendant bears the burden
proof the statutory defense. begin with the question whether Mr. Davidson statue entitled copyright protection. is, must decide whether defendant use was
infringing and, so, excused fair under the statue. not, turn what
damages are owed. answer the first three questions favor plaintiff
and thus must also consider damages. take each issue turn. Infringement
The infringement issue presents the court with two questions: Mr.
Davidson copyright valid and, so, was infringed? The parties disagree the correct answer each.
There question that plaintiff was tasked with creating replica
the Statue Liberty New York Harbor, but plaintiff testified that was
given artistic license and that both intended and achieved more
contemporary and feminine face the end. Defendant argues that there
insufficient evidence establish that accomplished his aim and that the
idea softer and feminine appearance not subject copyright protection.
Defendant also avers that did not infringe because nothing copied was
original. the face, which plaintiff points the discriminator between
the two statues, that was copied defendant. Mr. Davidson Statue Original
Plaintiff copyright registration was not within five years the public
availability his work, and thus his work not entitled statutory
presumption eligibility. See U.S.C. 410(c) (2012). therefore bears
the burden proving that his copyright valid, which say that must
prove his work original. See Feist Publ ns, Inc. Rural Tel. Serv. Co.,,
499 U.S. 340, 345 (1991) The sine qua non copyright originality.
This requires only showing some minimal degree creativity and that was his own independent creation those original elements. Id. The
Supreme Court described this level required creativity extremely low
and stated that even slight amount will suffice. Id. The focus the
expression original idea and not the idea itself. Oracle Am., Inc.
Google Inc., 750 F.3d 1339, 1354 (Fed. Cir. 2014). thus the case that
work art need not wholly original copyrightable; need only
new and original expression some previous work idea. See Feist, 499
U.S. 345 (stating that originality does not signify novelty discussing the
protection afforded compilations). Derivative works and compilations are
specifically afforded protection the act. U.S.C. 103(a) (2012). The
protection applies, however, only material contributed the author
such work, distinguished from the preexisting material employed the
work. Id. 103(b). the Seventh Circuit stated, plaintiff must show
nontrivial expressive variation between the original and the derived work
and that any such differences distinguish from the underlying work some
meaningful way. Shrock Learning Curve Int Inc., 586 F.3d 513, 521 (7th
Cir. 2009). This not meant different higher standard; the court
need only find the same level originality derivative work
that required for copyright any other work.13 Id. 520. Here, find that
burden met.
Mr. Davidson testimony establishes that his intent was not merely
copy the Statue Liberty. Although was hired clearly invoke the iconic
New York image, was his testimony that intended give the face
fresh look, updating and making her appearance more feminine.
contrasted his result with the harsher and more masculine look the
original. also testified that envisioned his mother-in-law inspiration
for the new look and viewed her picture every night during the construction
the face the statue. Though could not give detail specific elements the face, such the lips eyes, that set out change, believed that achieved softer and more feminine final appearance.
Defendant makes much the lack contemporaneous statements
made Mr. Davidson media elsewhere this currently-expressed
intent.14 Defendant also argues that plaintiff statements about the feminine
and contemporary appearance that sought evoke are mere ideas
unprotected the Copyright Act. the absence definable features alien
The Ninth Circuit has cautioned, however, that when the derivative
work instantly identifiable embodying the underlying copyrighted
[material] yet another form, the conclusion that nontrivial differences
exist could not reached jury. Entm Research Grp., Inc. Genesis
Creative Grp., Inc., 122 F.3d 1211, 1223 (9th Cir. 1997) (quoting Durham
Indus., Inc. Tomy Corp., 630 F.2d 905, 909 (2d Cir. 1980)). that case, the
claimed copyright was inflatable costumes separately copyrighted cartoon
characters. The circuit affirmed the district court finding that the only
differences between the two were attributable the form inflatable
costume rather than some new original expression creativity. Id. 1222. was thus only utilitarian aspects rendering two-dimensional image into three dimension inflatable plastic costume that constituted any difference.
Id. 1223. Utilitarian aspects are not copyrightable. Id.; U.S.C. 101.
Defendant also attempted introduce trial article from trade
publication, Walls Ceilings, which out court statements from Mr.
Davidson were referenced. Plaintiff hearsay objection was sustained and the
article was not admitted. note now, even had been admitted, would
not change our analysis. the original, defendant finds the necessary modicum originality missing.
Defendant also makes much the fact that plaintiff could not identify the
specific features that intended change order render his statue face
more feminine and softer. find such requirement the law, however.
The finder fact need only able observe nontrivial expression
artistic creativity. are satisfied that plaintiff succeeded making the statue his own
creation, particularly the face. comparison the two faces unmistakably
shows that they are different. Although the record does not contain many
pictures the original, the magazine cover provided plaintiff which bears picture the original Statue Liberty face sufficient. The differences
are plainly visually observable, can articulated, and are not merely ideas.
Compare 233-301 with 231-17. agree that Mr. Davidson statue
evokes softer and more feminine appeal. The eyes are different, the jaw line less massive and the whole face more rounded. was these
characteristics that drew Mr. McCaffrey the image. See Eden Toys, Inc.
Florelee Undergarment Co., 697 F.2d 27, 34-35 (2d Cir. 1982) (finding that
minor changes the illustration Paddington Bear, described giving the
bear different, cleaner look, were nontrivial). note well that Layne
Owens, the manager stamp development, was the view that quite
apparent that had the Las Vegas replica. 85. His statement
that [w]e were looking for different treatment this icon that has been different stamps, 244 along with Mr. Betts similar comments,
indicate that there are evident differences from the original.
Defendant argues that such apparent differences are but the result
camera angle, lighting, shadowing, and weathering and should ignored for
the purposes the originality inquiry. disagree. the court, the
differences the faces are meaningful and not trivial. Nor find any
secondary evidence support defendant assertion. contrast, the record replete with statements from the actors involved reaching the opposite
conclusion: the two faces are distinct and these new facial features were
appealing enough have induced Mr. McCaffrey select the image
plaintiff statue and for the Postal Service have publically affirmed its
decision feature Mr. Davidson statue new take classic icon.
view such statements and testimony secondary evidence what our own
comparison reveals. Mr. Davidson statue, although invoking existing
world-famous statue, original, creative work, and such the subject valid copyright registration. The Postal Service Copied Original Elements
Having determined that the face plaintiff sculpture distinct,
original, and protected, find that defendant use was infringing.
necessary element any infringement claim not just that the work
whole original but also that the part copied the defendant actually
original. Harper Row Nation Enterprises, 471 U.S. 539, 548 (1985).
Defendant argues that infringement cannot assumed simply because the two
works are found different. The government points the fact that the
Postal Service did not notice the difference between the two faces itself until
notified months after producing many millions stamps. The conclusion for
defendant that nothing original must have been copied. This nonsense. the face the Las Vegas statue that displayed the offending
stamp. the face that distinguishes the two statues. All the testimony
revolves around the two faces and whether the Las Vegas lady face
different. Having found that is, the conclusion that defendant use infringed inescapable. Mr. McCaffrey did editing the image other than sizing for display stamp and adding the normal stamp copy. find that the
Postal Service use the image copied all the original elements described
above. next turn the question whether defendant infringing use was
otherwise allowed fair use under the statue.
II. Fair Use
Some copying protected material characterized the Copyright
Act being fair use and thus excepted from the definition infringement.
This defense laid out U.S.C. 107 (2012):
Notwithstanding the provisions sections 106 and 106A, the
fair use copyrighted work not infringement
copyright. determining whether the use made work
any particular case fair use the factors considered shall
include (1) the purpose and character the use, including
whether such use commercial nature for nonprofit
educational purposes; (2) the nature the copyrighted work; (3)
the amount and substantiality the portion used relation
the copyrighted work whole; and (4) the effect the use
upon the potential market for value the copyrighted work.
There generally applicable definition fair use, and therefore each case
must decided its own facts and unique circumstances. Campbell
Acuff-Rose Music, Inc., 510 U.S. 569, 577-78 (1994). The courts have
generally considered each the four elements listed the statue applicable any particular case, and our review the case law reveals that the law has
not strayed far from those four considerations. any event, the parties have
limited themselves arguing the four enumerated factors, and are not
aware any other unique considerations apply here. Purpose and Character the Use
The purpose and character the use often the dispositive factor
the fair use analysis. This factor embraces both how the work used and
what end, i.e., whether the work somehow transformed the new use and
what the user the work doing with it. the work transformed the
new use, the law will generally allow under the fair use doctrine. See
Campbell, 510 U.S. 579 the goal copyright, promote science and the
arts, generally furthered the creation transformative works The
Court posed the question whether the new work merely supersede[s] the
objects the original creation instead adds something new, with further
purpose different character, altering first with new expression, meaning,
message. Id. Further, the statute requires courts consider whether the end
use the new work commercial nature for nonprofit
educational purposes. U.S.C. 107. The former suggesting that the use not protected the statute.
The government does not argue that nature its use was
transformative. Instead argues that the nature and character its use favors finding fair use because, workhorse stamp, the vast majority the
revenues the Postal Service represent payment postage for the universal
required service mail and not payment for the art shown the stamp.
Def. Post-Trial Br. 23.
Plaintiff disagrees, pointing the fact that USPS sold over billion
worth the stamps bearing plaintiff work. Even using defendant expert
numbers, the Postal Service made $140 million pure profit from breakage
from the Lady Liberty stamp and the flag stamp combined sales. This,
plaintiff view, purely commercial use not intended protected
section 107 fair use defense. agree. the Federal Circuit found the Gaylord decision, where
the Postal Service had sold $17 million stamps, $5.4 million which were
retained collectors and represented pure profit the government, the
stamp clearly has commercial purpose. Gaylord United States, 595 F.3d
1364, 1374 (Fed. Cir. 2010). The fact that smaller percentage the overall
sales total represented breakage retainage does not make the use
noncommercial. Despite the fact that regularly operates loss, the Postal
Service business and seeks operate profit, least seeks fully
fund its operations through its own revenues received from sales. offers the
service delivering mail, which is, broad sense, competition with
private vendors offering similar services. The testimony the Postal
Service own employees made clear that the attractiveness the image
played key role selecting hopes attracting both overall higher sales
and higher retention rates. The first factor strongly favors finding
infringement. Nature the Copyrighted Work
The nature the copyrighted work factor considers, borrow phrase
from Justice Story, the value the materials used decide whether
copyright protection should extended despite claim fair use. Folsom Marsh, Cas. 342, 348 (Cir. Court, Mass. 1841) (cited the Supreme
court when considering this factor Campbell, 510 U.S. 586). Some
copyrighted works will receive less protection the face fair use claim
than others, such when work derivative, here. See Campbell, 510
U.S. 586 some works are closer the core intended copyright
protection than others, with the consequence that fair use more difficult
establish when the former works are copied The courts consider questions
such (1) whether the work factual informational, and (2) whether the
work published unpublished, with the scope fair use involving
unpublished works being considerably narrower. Blanch Koons, 467 F.3d
244, 256 (2d Cir. 2006) (quoting Howard Abrams, The Law Copyright,
15:52 (2006)). work expressive creative, use another less
likely considered fair. See Gaylord, 595 F.3d 1374 (citing Blanch, 467
F.3d 257).
Here, defendant claims that the derivative nature Mr. Davidson
replica statue means that afforded only thin copyright. Def. PostTrial Br. 23. Defendant points the fact that the Postal Service was itself
confused and did not recognize that plaintiff work was not the original New
York statue and that the public did not immediately recognize the difference.
The suggestion that the image added nothing the postage aspect the stamp not credible, however. that were the case the Postal Service would simply
issue characterless stamps with nothing but the amount postage. Nor would
the Postal Service invest much effort the images utilizes. More
particularly, this case, clear that the creative elements plaintiff work
are precisely what attracted the Postal Service interest.
Plaintiff counters that the creative elements employed Davidson that cited above finding originality are precisely what mitigate against fair
use here. Plaintiff also suggests that the fact that statue has been publicly
displayed monument since 1996, i.e., has been widely published, cuts against
fair use.
This factor favors neither party. Although did find that the original
elements plaintiff statue were creative and expressive, its intended use replica mitigates favor defendant. Further, plaintiff argument that his
work had been publically displayed for over years before the use not well
founded. When work published, subsequent use more likely
considered fair use. See Blanch, 467 F.3d 256. sum, find this factor
favors neither party.15 The Portion Used
Also relevant this inquiry the substantiality and portion the
original work used. This self explanatory. The more the original work
copied, the less likely the new use will considered fair, and, the portion
copied the critical core expressive material, that use will not fair.
See, e.g., Harper Row Publishers, Inc. Nation Enters, 471 U.S. 539, 56466 (1985) (affirming that copying 300 words from President Ford memoirs
was infringing because those words went the heart the book
Here find that this factor favors plaintiff. The original and
expressive portion plaintiff statue was the face, which was almost entirely
captured (at least from the vantage the photograph) the stamp. This
factor mitigates against the government asserted defense. the Gaylord case, the Federal Circuit affirmed this court holding
that the use image the Korean War Memorial was not fair use. Both
courts found for plaintiff the second factor. The case distinguishable,
however, because Mr. Gaylord monument was not derivative work. The Effect the Use
The fourth inquiry looks the effect the use upon the potential
market for value the copyrighted work. U.S.C. 107. Plaintiff
admits that this factor tilts the government favor plaintiff could cite
harm Mr. Davidson business from the Postal Service use, and has
shown other interest exploiting the work. find this factor favors
defendant. The Use Was not Fair balance, find that defendant has not proven its use have been
fair. The Postal Service use the image its ship the line
workhorse stamp, printing billions copies and selling them the public
part business enterprise whether for use send mail retained
collections overwhelmingly favors finding infringement that fair
use can found. The government citation the fact that only used the
image its workhorse stamp ironic given that, although proportionally the
profit low compared that cited Gaylord, the overall numbers are
vastly higher. Defendant collected over billion revenue (both stamps,
Lady Liberty and flag) from the use Mr. Davidson statue, and, even
though very low portion the revenue represents profit, that number over
$70 million for the Lady Liberty stamp alone. Some portion that owed plaintiff damages. Further, the portion used was entirely what
consider have been the original work contributed Mr. Davidson. The
government only real defense that its use did not particularly harm
plaintiff business industrial sculptor. That may true, but also
note that certainly did not benefit him. The Postal Service offered neither
public attribution nor apology.16
III. Damages
Having reached the conclusions above, consider the extent
compensation owed Mr. Davidson under U.S.C. 1498(b). The statute
states that, when the court finds infringement, should award reasonable and
The Postal Service issues public information notices when new
stamp offered the public with information about the art used the stamp.
Even after the error was found, USPS declined update its informational
bulletin with Mr. Davidson name.
entire compensation damages for such infringement. The Federal Circuit
explained its second Gaylord opinion that this measure the same under
the Copyright Act provision for actual damages, U.S.C. 405.17 678 F.3d
1339, 1343 (2012). The court found that case that the measure damages
was the fair market value license use plaintiff work defendant did.
Id. This assumes willing buyer and willing seller negotiating arm
length. Id. Assuming this framework, the matter left the trial court
discretion craft appropriate remedy. Gaylord United States, 777 F.3d
1363, 1369 (Fed. Cir. 2015).
Much the trial testimony consisted the respective experts opinions the value non-exclusive license for work such the sculpture
infringed here, well testimony fact witnesses what the Postal
Service practice was valuing, paying and selling licenses when did
properly. Defendant also offered survey expert whose work sought dim
the impact the retention numbers (those stamps representing pure profit
USPS). begin with the relevant fact testimony and then consider that
the experts. USPS Own Licensing Practices
The Postal Service has both art department for acquiring the rights images used its stamps in-licensing and separate department for
selling the rights use the image stamps (out-licensing). Both are relevant our inquiry. What USPS Pays for Art
Defendant overall approach hypothetical negotiation was that,
because has never paid more than token amounts for the use images, the
court should cap damages the most the Postal Service ever voluntarily pays,
i.e., $5,000. The testimony Mr. Gicker, Ms. Brown, and Ms. Handwerger
was unequivocal that USPS never paid more than $5,000 for image
used stamp. The amount was typically the $1,000 $2,000 range. Mr.
McCaffrey testified that 2008 the average was $3,000 artist was
commissioned illustrate image for use stamp, and the cap was
$5,000. Tr. 751-52. And the case that some entities will give USPS no-
Other types damages, such punitive, are not available against the
government.
fee license for use their art stamps. Two such examples given trial
were that the Walt Disney Corporation and the estate Andy Warhol.
plaintiff points out, however, such use comes with attribution, which amounts free publicity. Mr. Gicker explained that most artists consider honor have their work used stamp and view the visibility and publicity highly valuable intangible benefit. Tr. 908-909; see also 217
(Sidney Brown testimony). Plaintiff, course, was not given that option.
Ms. Brown testified that the market for art and photos available the
Postal Service ample. See 111-12. This especially for
patriotic images because they are widely available from stock photography
companies. Tr. 980 (Gicker). This presumably helps keep the price down for
any single image desired USPS. Even the Postal Service cannot find the
exact image desires, can commission photographers produce the image.
These arrangements also not exceed $5,000. Tr. 761-63 (McCaffrey); Tr.
904-906 (Gicker). All the relevant USPS witnesses stated that running
royalty rate was unheard and non-starter. 857 (stating that such arrangement was non-starter). What USPS Demands License Its Own Art heard the testimony Amity Kirby, who the senior licensing
specialist USPS. She has worked there for approximately years, which
two three have been the senior licensing specialist. She currently
responsible for all the licensing that the Postal Service does its
intellectual property. Prior this position she worked licensing for the
Smithsonian Institute. She told the court about her experience out-licensing
images stamps for commercial usage other entities and testified that
USPS practice copyright its stamps and stamp booklet covers. When
entity approaches USPS wanting use the image stamp commercially,
the Postal Service requires license agreement, either fixing flat fee
running royalty. See Tr. 1036. If, for example, author group wanted
use the image stamp textbook and the run was limited 100,000
copies, the Postal Service would likely ask for flat fee. Tr. 1037. the
other hand, company approached Ms. Amity with request use stamp one million tee shirts for sale the public, she would seek running
royalty.18 Tr. 1037-38. The higher the distribution, both total units and
channels distribution, the likelier that USPS would demand running
royalty.19 She also testified that nonprofit uses have the past resulted nonfee agreements. Tr. 1042. Her department considers stamp images art.
Tr. 1047. was her testimony that, during the relevant time period, USPS
practice was license out its own intellectual property rate total
gross sales the manufacturer the product.20 Tr. 1057 (referencing 2006).
Today that number 10%. Tr. 1060-61. USPS might deviate from that
number, but 10% the rate that tries achieve today.
Ms. Kirby also explained that companies frequently seek buy
package images from USPS use what she called program
organized around some theme. For example, Ms. Kirby stated that one
frequent subject out-licensing the Postal Service popular love stamps
with romantically themed images. license covering several images would
typically involve running royalty. Tr. 1063. She further testified that
license for single image was more likely result flat fee agreement. Id.
The example she used was again textbook displaying the image single
stamp. That sort license would, however, calculated the total
anticipated images being produced the licensee. Tr. 1068. that sense, attempt reverse engineer the result what running royalty rate might
ultimately produce. was her general observation that the Postal Service
She also testified that, group wanted print small run tee
shirts bearing the image stamp for event, that would result flat fee
arrangement. Tr. 1039 (stating that the average was $3,000 $5,000). Ms. Amity explained, running royalty refers per-use
royalty and employed for extended periods use. Tr. 1054. 157 example just one such license agreement with
running royalty fee based total gross sales vintage metal signs bearing
images USPS stamps. Plaintiff also introduced example agreement
with puzzle manufacturer which USPS negotiated running royalty images its own work and the image included someone else
intellectual property; the example being stamp bearing the image Disney
character. 158. 159 was example license for the manufacture gold foil stamp replicas. The rate was again 5%, but the contract included minimum guarantee $50,000 the Postal Service.
would try negotiate the best that can get, because her job make
the Postal Service money. Tr. 1070. Expert Testimony the Value Hypothetical License
Both parties presented testimony from business valuation experts whose
expertise the valuation intellectual property. Plaintiff expert
considered the market for artwork broadly speaking, while defendant expert
centered USPS own history buying the rights art. Predictably, the
results are disparate. Defendant also presented testimony from expert
public surveys. This individual conducted such survey regarding the
retention the Lady Liberty stamp and attached flag stamp, inquiring the
numbers retained and the reasons for retention. outline each expert
testimony below.21 Mr. Timmins
Plaintiff presented the testimony Jim Timmins, expert valuing
intellectual property, including copyrights. currently the owner and
managing partner Teknos Associates, Silicon Valley business valuation
and financial advisory firm. His firm primary work provide
business valuation services companies, venture capital firms and others
interested the field for tax compliance, financial reporting, transaction
support, and occasionally litigation support. Tr. 1138. His firm specializes technology-driven companies, valuing their securities and other intangible
assets, such patents, copyrights, and trademarks. has provided opinions roughly court cases around the country.
Defendant also offered the testimony Daniel Piazza, curator
philately the Smithsonian National Postal Museum, his dream job.
Although extremely knowledgeable and fascinating expert the history postage and stamp collecting general, did not find his testimony
particularly helpful reaching conclusion what the market value
license would have been for Mr. Davidson copyright 2010. Mr. Piazza
most relevant testimony was that the Lady Liberty stamp was not highly
sought after collectible. That fact was not seriously disputed, and
plaintiff expert made attempt specially capturing dollars associated
with collectors other than assigning royalty rate unredeemed stamps
generally, which the number stamps retained collections but
subset.
Prior nine years with his own company, Mr. Timmins worked for
years Wall Street doing investment banking. was these firms that
began valuing businesses. then moved Silicon Valley, where spent
the next years venture capital firm, working bringing companies
initial public offering. this position, again valued business assets,
including intellectual property and was involved negotiating the purchase
and sale such rights. Tr. 1142. Included that experience was the
licensing copyrights. Tr. 1143. holds bachelors degree from the
University Toronto and masters business administration MBA from
Stanford University. does not have any prior experience valuing
copyright for art.
His ultimate conclusion was that the license for Mr. Davidson statue
should have generated running royalty rate 1.5% for the Lady Liberty
stamps used send mail and rate for stamps retained and not redeemed postage. also opined that the convoyed sales the flag stamp should covered 0.75% rate for flag stamps used send mail and 2.5% for
those not redeemed postage. Philatelic products, sold strictly for collectors,
according Mr. Timmins, were entitled 10% royalty rate.22 applied
these rates against USPS own recorded sales and estimated
retention/breakage figures. The end result which was license valued
approximately $53,013,154.23 reaching these conclusions, Mr. Timmins considered the factors
influencing both sides positions, such timing, duration, exclusivity, and
territory. was his opinion that the Postal Service 2010 was under pressure release new Forever workhorse stamp and that viable alternatives,
considering both time and cost, were not available USPS. See Tr. 1177-83.
Mr. Timmins then considered comparable licenses the marketplace
inform his opinion, centering licenses for artwork. That search revealed
Philatelic products are collectible items produced for sale other than
for use stamps. The parties agreed that $29,515 such products had been
sold USPS associated with the two stamps issue. alternative, plaintiff post-trial brief suggests mixed license $1,000,000 for mail use stamps, running royalty 10% for unredeemed
stamps, and for the flat stamps not redeemed. Plaintiff offered
$11,645,411 the sum that those numbers would generate. See Pl. PostTrial Br. 35.
running royalty rates ranging from 2.5% 10%, with average 6.5%. Tr.
1211-21.
Mr. Timmins did not consider USPS own policy not paying more
than $5,000 relevant fact and did not view reflection the
bargaining positions the parties. Tr. 1207. thus did not factor into his
conclusion other than reject comparator his basket similar
transactions. did, however, consider Mr. Davidson lack history
licensing his artwork. This, concluded, put plaintiff weaker negotiating
position, Tr. 1261, although would not preclude Mr. Davidson from insisting running royalty. simply drove down the rates Mr. Davidson might have
achieved below the market averages found his research. Mr. Timmins
also assumed that the license agreement would provide attribution Mr.
Davidson, which presumably would worth something Mr. Davidson. Mr. Bokhart
Defendant offered the opinions Christopher Bokhart. was offered
and accepted expert the valuation intellectual property. holds bachelor science degree management, with emphasis accounting
from Purdue University. currently certified public accountant and
also certified financial forensics and fraud examining. began his career 1982 doing business valuation and litigation support firm called
Peterson Consulting, spin-off from Arthur Anderson. quickly became the go-to his firm gained experience valuing intellectual property.
Tr. 1548. stayed Peterson for six years, after which and several others
from the firm started their own business, the IPC Group. The IPC Group grew
over the years and eventually merged with former partners Peterson
Consulting form InteCap, which employed about 200 people. Mr. Bokharts
work both firms focused valuing intellectual property part business
valuation and financial consulting.
InteCap has since been acquired another larger consulting
conglomerate, Charles Rivers Associates, where Mr. Bokhart currently
vice president. continues work valuing intellectual property,
including copyrights, trademarks, trade secrets, and patents. His work
involves both litigation support and negotiation license agreements and
negotiations for purchase sale intellectual property. testified that
has provided hundreds opinions valuation litigation. Tr. 1551.
characterized his negotiation experience more than handful times.
Id. His work valuing copyrights has been primarily outside court.
exception, provided opinion and expert testimony for the government the
Gaylord case this court.
Mr. Bokhart conclusion was that Mr. Davidson hypothetical license
would have been worth more than $10,000. This conclusion was informed the facts that plaintiff has history making commercial use his
artwork and that the Postal Service comparable licenses were all below
$5,000. testified that examined hundreds such licenses. also
thought that USPS had viable alternatives agreement for less than
$10,000 could not reached. essence, thought the comparable market
was only what USPS paid for similar licenses and that Mr. Davidson had
suffered little harm because never made attempt earn profit
commercialize himself. Tr. 1657. Dr. Isaacson
Defendant also offered the testimony Dr. Bruce Isaacson, expert the field consumer surveys. Dr. Isaacson has bachelor science
degree engineering from Northwestern University, MBA from Harvard
Business School, and doctor business administration also from Harvard
Business School. Dr. Isaacson career has focused marketing research
regarding consumer behavior. His tool the consumer survey. has
provided surveys and testimony for litigation various federal and state courts
and the Trademark Trial and Appeal Board. has also testified before the
Federal Trade Commission and the Better Business Bureau. currently
the president MMR Strategy Group, marketing research and consulting
firm. has been with MMR for years. One this firm specialities
providing litigation surveys. estimated that his firm has conducted close 500 surveys while has been with the company, the vast majority
which [he] would have been either involved with either directly managing
supervising those who were managing the survey. Tr. 1273.
After familiarizing himself with the particulars this case, reading
court documents, deposition transcripts, and doing some research the
business USPS generally, conducted survey. His survey looked
three different areas inquiry: whether respondent had ever purchased
the Lady Liberty stamp; what percentage those who had purchased
stamp intended retain the stamp (i.e., not use send mail) and how many
they intended retain; and why they intended keep and not redeem
for postage. Tr. 1294. testified that was unsatisfied with the Postal
Service own research retention rates because either did not look
specifically this stamp was conducted ways that were not
necessarily consistent with those for litigation survey. Tr. 1295. did not
explain the inconsistency other than that USPS retention figures often
represent retention across all stamps for single year.24 Id.
There were 1,790 respondents who responded Dr. Isaacson survey. testified that used control stamp weed out people who might have
been mis-remembering the particular stamp referenced the survey, Tr.
1302-03, the results which were remove the responses from
the final tally. After controlling for the false positives, the results were: 43% respondents reported purchasing the Lady Liberty stamp; 18.5% that
group have retained some these stamps; 15.4% respondents said that they
still planned use those stamps send mail; 3.6% said that they intended
collect them; and approximately just over intended give them away, sell
them, make other use the stamps. Tr. 1318-20. did not provide any
data the flag stamp.
These figures were examined some detail cross-examination.
Using the same survey results but employing method suggested plaintiff
counsel cross-examination resulted 46% respondents still holding the
Lady Liberty stamp. See Tr. 1350-52. That result was reached comparing
the number respondents who indicated that they had purchased the stamp
and the number persons who indicated that they still retained least one
the stamps. Tr. 1351. Dr. Isaacson stated that you could that and that
did not dispute that percentage. Id. That figure was then applied the total
United States stamp-buying population estimate the number people still
holding this stamp: just under million. Tr. 1351-52 (Dr. Isaacson
response plaintiff counsel posting approximately million: That would right The total number stamps still retained was average 10.1
per person. Tr. 1352. Multiplying those two numbers resulted about 494
million these stamps still outstanding (still retained purchasers and not
redeemed) after five years. Id. Taking that figure and comparing the total the Lady Liberty stamps sold, resulted retention rate about 10%. Tr.
1355-56 you agree with that? The Witness: Yes. unclear whether Dr. Isaacson was asserting that USPS had
figures regarding only this stamp retention rates. did state that
checked his own work against the Postal Service figures general check the reasonableness his results. Plaintiff Has Proven Entitlement Damages
The court left craft remedy that best reflects what the fair market
value nonexclusive license for plaintiff artwork would have been
2010. The Federal Circuit has endorsed the use patent law tools value
licenses the copyright context. See Gaylord, 777 F.3d 1367. These
include the factors enumerated Georgia-Pacific Corp. United States
Plywood Corp., 318 Supp. 1116, 1120-21 (S.D.N.Y. 1970). Courts are
encouraged consider objective indicia the value similar work the
market. See, e.g., Jarvis Inc., 486 F.3d 526, 533-34 (9th Cir. 2007) (also
cited the third Federal Circuit Gaylord decision). These considerations may informed the licensor and licensee own history similar
transactions, but these will not employed artificial inflator nor deflator the fair market value the time the negotiation would have taken place.
Gaylord, 777 F.3d 1368 (citing Oracle Corp. SAP AG, 765 F.3d 1081,
1093 (9th Cir. 2014)). The court not foreclosed, however, from considering
information that comes light after the hypothetical negotiation. See Lucent
Techs., Inc. Gateway, Inc., 580 F.3d 1301, 1331 (Fed. Cir. 2009). These
facts are what the Supreme Court long-ago dubbed the book wisdom.
Sinclair Refining Co. Jenkins Petroleum Process Co., 289 U.S. 689, 698
(1933).
The value reached the court must assume willing buyer and
willing seller. Gaylord, 678 F.3d 1343. The Federal Circuit applied this
axiom affirming this court damages award after remand Gaylord,
explaining that the basic premise the hypothetical negotiation would
have been the opportunity for making substantial profits the two sides were
willing join forces, which must assume that they were. 777 F.3d
1368. find that principle particularly apt this case where the
government, just did Gaylord, relies its unique history paying
only $5,000 for the rights images its stamps. the Federal Circuit
stated the second Gaylord decision and then later explained its third
decision, such holding would ignore the other side the bargain: plaintiff
evidence the value such license. Having infringed the copyright
billions times, defendant cannot now shield itself from liability claiming
that would have walked away from the deal. Gaylord, 678 F.3d 1343. have assume willing buyer well willing seller. This means that
the government cannot avoid accountability arbitrarily imposing limits
what would have been willing pay. Id. (citing Rite-Hite Corp. Kelley
Co., F.3d 1538, 1555 (Fed. Cir. 1995) ([W]hat infringer would prefer
pay not the measure damages. )). The rule rationality view the
evidence presented. See Gaylord, 777 F.3d 1368. conclude that the most appropriate measure damages mixed
license which employees flat fee for the Lady Liberty stamps used send
mail and running royalty for retained stamps and philatelic products. See id. 1344 The trial court analysis hypothetical negotiation between
[plaintiff] and the Postal Service may lead conclude that different license
fees are appropriate for the three categories infringing goods
Given the sheer weight the number these stamps anticipated
produced and used postage, would have made economic sense for the
Postal Service have paid running royalty for such use, nor think Mr.
Davidson would have been position demand one. Mr. Stratton
explained, the Postal Service revenues not meet its expenditures. The
cost carrying mail and maintaining the workforce exceeds the
stamp sales and other revenue earned. essence, each stamp redeemed for
service small contract which USPS will lose money. thus conclude
that paying running royalty top the loss already baked into each stamp
redeemed for service economically unreasonable and that fact would have
been obvious both parties the time the hypothetical negotiation. this
respect think relevant that other images could have readily been obtained
that would perform the basic function producing workhorse stamp for
actual postal use. Thus find the nominal and historically accurate sum paid the Postal Service, namely $5,000, appropriate flat rate for this use.
There is, however, portion stamps sold which the Postal Service
makes money. The law presumes, noted above, that both parties would
have entered the negotiation looking maximize profit. USPS makes almost
entirely pure profit from stamps never redeemed for postage. was USPS
employee testimony that maximizing retainage and breakage was always
goal. was also the testimony USPS employees that the public expected
new stamps and desired attractive images. that end, Mr. McCaffrey
selected the image Mr. Davidson work because was just that: new, fresh,
and attractive and thus likely attract buyer interest. Although bevy
patriotic images was available, market considerations drew Mr. McCaffrey
use Mr. Davidson image. USPS was using his image maximize its own
profit, and not unreasonable conclude that plaintiff would have
demanded some percentage those stamps, and other philatelic products,
representing profit defendant. also reasonable conclude that the
Postal Service would have been willing pay such percentage since
reflects real additional risk. The royalty only attaches purchases
stamps that would not engender additional cost. Gaylord, the market
incentives were aligned both sides the deal agree running royalty retained stamps. Gaylord, 777 F.3d 1370. Other than the Postal Service
itself, neither party presented evidence similar transaction where billions copies image were produced for commercial sale without per-use
royalty. thus conclude that running royalty appropriate for these items
because balances the risks and rewards for both parties. Id. 1369. find that running royalty unredeemed and philatelic
products the correct figure. That figure supported Mr. Timmins work researching comparable art licenses, Ms. Kirby testimony the rates
charged USPS when out-licenses its own art, and the USPS licenses
introduced into evidence. Although Mr. Timmins opined that, the base was
made smaller excluding stamps against which running royalty would
applied, the rate would higher, find that Mr. Davidson would not likely
have achieved higher rate given his lack experience selling his own
intellectual property. reasonable figure supported the average rates
presented Mr. Timmins and USPS own out-licensing. not, however, find that appropriate apply this rate against
the attached flag stamps. heard evidence why those stamps should included the base stamps against which the royalty should applied
nor did hear any legal reason why they need included. the patent
context, convoyed sales are often included the base, but the test generally
whether the convoyed item functionally part the same assembly
machine the patented item. See generally Rite-Hite Corp. Kelley Co.,
Inc., F.3d 1538, 1550 (Fed. Cir. 1995). Here, the stamps are printed and
sold side side single booklet stamps, but they are essence entirely
separate entities. The factors leading the desirability the Lady Liberty
image not automatically translate into retention the flag stamp and
were presented with evidence such phenomenon. thus not
include the flag stamps the base. are thus left with only the question the quantum base for the
retainage and breakage rate applied against. choose the Postal
Service own 2015 estimates the most reasonable measure for total sales
and its estimate for breakage rates. The parties stipulated that 4,948,761,166 the Lady Liberty stamps were sold. The final year sales was 2014. Total
amount collected for those sales $2,190,414,155. Stip. Facts 28. The
Postal Service estimated the breakage rate for all workhorse stamps during this
time period 3.24%. Id. 29. Thus plaintiff applies 3.24% against
$2,190,414,155 arrive figure $70,969,419 for breakage and retention.
This similar to, and actually lower than, the figures that Dr. Isaacson
survey data might suggest.25 find that conservative estimate and
appropriate for use here. thus apply royalty rate against that figure,
which results $3,548,470.95 sum.
The parties agreed that the total revenue philatelic products sold
amounted $29,515. Applying rate, the royalty for those products
equals $1,476. That number added the $3,548,470.95 along with the
$5,000 flat fee for redeemed stamps, for total unadjusted damages figure
$3,554,946.95. note that plaintiff cites various contemporaneous post facto
circumstances book wisdom indicators that the government would have
paid least $10,000,000 for this license. They are primarily the cost
produce these stamps and the need rush them into print time for the 2010
Christmas mailing season. Defendant counters with its own example 9/11
commemorative stamp that was rushed production suggesting that Mr.
Davidson would not have had USPS over the barrel, and thus the Postal
Service would have had viable alternatives given the large selection
patriotic images available stock photography repositories. not find
the cost produce the stamps the concern about rushing production
telling what USPS would have paid. That cost, the hypothetical world the negotiation, would have been incurred after agreement would have
been reached. the need hurry the production, given defendant own
counterexample viable alternatives available short order, find that
these circumstances not suggest license fee higher than the one have
adopted. Nor, however, find that the government viable alternatives
scenario necessitates finding that would not have paid more than $5,000 unclear from the record precisely how defendant wished the court have used Dr. Isaacson retention rate estimate. The 3.6% figure posited higher than USPS own breakage rate (3.24%) across all workhorse stamps
for the years issue, which was the figure used Mr. Timmins crafting
his damages figure. Presumably the government does not wish apply the
3.6% rate against the $70 million unredeemed stamps. fair,
assume this testimony was offered more general way disputing any
claim that Mr. Davidson work drove above-normal collection the stamp.
That ultimately did not end playing into plaintiff damage theory. total for all usage. The economic incentives and realities cited above would
have driven both parties towards running royalty the range that have
found.
CONCLUSION
Plaintiff has proven its entitlement actual damages $3,554,946.95,
plus interest. The parties are directed consult regarding the quantum
interest and file joint status report before July 27, 2018, informing
the court their agreed-upon amount their respective positions that
figure.
s/Eric Bruggink
ERIC BRUGGINK
Judge